Registration with FRA Prior to List
Registration with FRA Prior to Listing on the Stock Exchange
Last week, two decisions were issued and published by the Financial Regulatory Authority (“FRA”) regarding the procedures for listing securities. The decisions continue the process of introducing changes to the wider environment which determines the relationship between the FRA and the Stock Exchange (“EGX”) with respect to listing procedures and follow a series of amendments with the same aim.
Background
Decision No. 14 of 2018 marks a continuation of recent efforts by the FRA to expand its influence over the listing process. FRA Decisions No. 122 and 121 of 2017 were discussed in our ELU issues of November Week 4 2017 and December Week 1 2017, respectively. The former was published on 12 November, 2017 and amended various provisions in the rules governing the listing and delisting of securities on the EGX. The most significant of these amendments was the newly inserted provision which significantly increased the FRA’s powers by stipulating that it must pre-approve the listing of securities issued by companies or other entities prior to starting the listing process with the EGX. The latter of the decisions, No. 121 of 2017, was published on 28 November 2017, and outlined the conditions and regulations for registering securities with the FRA in preparation for listing on the EGX.2017 Amendments to the Original Listing Rules and the Issuance of Further Rules
As per the Capital Markets Law No. 95 of 1992, listing and delisting rules are set by the FRA and constantly updated to suit the economic climate. This follows the system which typically regulates Stock Markets and the authorities that regulate them by imposing a balance between the entity which determines the rules, and the market which applies them. Decision No. 122 of 2017 altered this tradition by transferring the power of approving the listing of securities from the Stock Exchange to the FRA. The Decision required Listing Applicants to pre-register with the FRA before commencing their normal listing procedures by amending Decision No. 11 issued by the FRA’s Board of Directors in 2014. Article 1 of Decision No. 122 of 2017 stipulated that “companies and other entities wishing to list securities on the Egyptian Stock Market shall have to abide by the rules which the FRA’s Board of Directors shall set”. Decision No. 121 of 2017 followed by setting requirements for data and conditions for registration.The Recent Decisions
FRA Decision No. 14 of 2018[1] was published on 5 May 2018 and amends Decision No. 121 of 2017, adding a provision which states that once an entity has received approval to register with the FRA under certain conditions, it remains vulnerable to the FRA’s power to revoke its approval if any of their conditions are no longer met. Article 5 states that under all circumstances companies and entities must receive the FRA approval to make any changes to the entity’s equity structure after its registration and listing has been pre-approved. It is noteworthy that the Article also states that such entities, once registered, must list their securities within one month of their approval, after which the approval expires unless renewed by the FRA. Meanwhile, Decision No. 15 of 2018,[2] published on 8 April 2018, amends the FRA’s Board of Directors Decision No. 143 of 2010 by altering some of the listing conditions, namely (i) repealing the requirement that the number of shares owned by members of the Board of Directors must make up at least 10% of the company’s total shares during the time in which it is listed and (ii) requiring the main shareholders of a company, its founders, and members of its Board of Directors to keep a minimum amount of shares in accordance with listing requirements instead of specifying that they own a minimum of 50% of shares. [1] FRA Board of Directors Decision No. 14/2018 amending its Decision No. 121/2017 on the conditions and regulations of registration with FRA for companies wishing to list on the Egyptian Stock Exchange and the procedures for approving the prospectus, Egyptian Gazette, Issue No. 102, 5 May 2018. [2] FRA Board of Directors Decision No. 15/2018 amending its Decision No. 143/2010 regulating the registration and trading in relation to securities companies, Egyptian Gazette, Issue No. 82, 8 April 2018.
أصدرت الهيئة العامة للرقابة المالية ("الهيئة") في الأسبوع الماضي قرارين بشأن إجراءات قيد الأوراق المالية بالبورصة المصرية. ويمثل القراران الأخيران جزء من تغييرات طالت الإطار الأوسع الذي يحدد العلاقة بين الهيئة والبورصة فيما يتعلق بقيد وشطب الأوراق المالية، وذلك ضمن سلسلة من التعديلات التي صدرت قبل ذلك.